NEW YORK ( TheStreet) -- Cisco's (CSCO - Get Report) recent struggles have called into question what constitutes a tech bellwether, with some observers arguing that the company's recent results are no longer a strong indicator of economic growth.
Investors are certainly spooked by Cisco's problems. Shares of the networking behemoth are down more than 33% over the last 12 months, while consumer giant Apple (APPL), not always perceived as a bellwether for the broader expanse of the tech market, is up almost 38%.
Is it time for the tech sector to rethink its criteria for bellwether status?
Webster's dictionary defines a bellwether as "anything suggesting the general tendency or direction of events, style, etc." That's a broad description that could be applied to a host of tech companies, including Cisco, Apple, Intel (INTC), IBM (IBM), Oracle (ORCL) and Google (GOOG).For Brian Marshall, an analyst at Gleacher & Company, bellwether status is dictated primarily by a firm's impact on its industry, although other factors such as company size, innovation and ability to tap into key market trends are also important. "Apple is the gold standard for a tech bellwether in terms of innovation, absolute size, absolute revenue levels, profitability and plenty of runway ahead," said Marshall, in an email to TheStreet. "Cisco, on the other hand, is what you don't want from a tech bellwether -- huge share of total available market, looking for growth in lower margin segments, getting attacked by competition." For others, indicator-status depends on a more specific equation. "Within tech, I'd argue that those companies participating in the major sub-sectors (for example, semis, software, networking, servers, services, handsets etc.) that are on the attractive side of the 80/20 rule